Study on Gonka Deposit and Taurus Extension

RNS Number : 7037N

Hummingbird Resources PLC

02 February 2016

 

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

2 February 2016

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

 

Study on Gonka Deposit and Taurus Extension
 

Hummingbird Resources plc (AIM: HUM), is pleased to announce the results of a Desktop  Study on the Gonka deposit (the "Study"), located 5km south of the proposed Yanfolila Gold Project ("Yanfolila" or the "Project") plant in Mali, prepared for the Company by DRA Projects ("DRA"). 

Gonka is not currently included in the Yanfolila Definitive Feasibility Study ("DFS") and the results of the Study demonstrate the potential to significantly increase the NPV and mine life of the Project.

Taurus Mining Finance Fund LP has agreed a one month extension to the US$15 million bridge facility to the 8^th March 2016.  The Company will provide a further update prior to the 8^th March 2016. 

Dan Betts, CEO of Hummingbird Resources, said: 

"It has always been our belief that Yanfolila's mine life will grow significantly and this is another step in that process.  This Study adds US$24m to the DFS NPV and 169k ozs gold to the mine life, a very pleasing piece of upside.  This Study is early stage however we anticipate extensions of the underground resources to increase the size of this deposit even further in the future. 

"Gonka is located only 5km south of the Yanfolila process plant and so is ideally placed to add open pit ore and higher grade, over 4g/t, underground ore into the mine plan to increase the Project's production rate and enhance the overall economics. As the underground mineralisation is open, we intend to not only improve the resource categorisation of Gonka but also test and define depth extensions, potentially adding to the mine life."

Gonka  Study Highlights

The  Study completed by Hummingbird's consultants, DRA, is based on a combination of the SAMREC compliant Inferred Mineral Resources of 139koz @ 2.9g/t (corresponding to the open pit) and additionally a Goldfields internal estimate of 170koz @ 4.03g/t (corresponding to the underground), as reported in the Company's London Stock Exchange announcement of 15 December 2015 (a copy of which is available on the Company's website). Using the above mentioned resources, DRA undertook initial underground mine design and pit optimisation work which resulted in a mining inventory of 169koz, mined over a 6 year mine life, including:

·    92k ozs @ 2.3g/t in open pit; and

·    77k ozs @ 4.5g/t underground

The mine schedule produced by DRA is summarised in the table below:

		Years
Item	Units	1	2	3	4	5	6
Open Pit Waste	kt	4,108	2,559	2,223	1,271	73	-
Open Pit Ore	kt	300	300	300	281	42	-
Open Pit Ore Grade	g/t	1.91	1.96	1.97	3.10	5.41	-
Underground Ore	kt	-	-	-	41	281	217
Underground Ore Grade	g/t	-	-	-	3.97	4.58	4.41
Contained Gold	koz	18.4	19.0	19.0	33.2	48.8	30.8

To test the economic viability of Gonka, DRA completed a conceptual financial analysis of a standalone Gonka operation, but assuming ore was trucked and treated through the Yanfolila process plant 5km away. This analysis did not consider the integration of the Gonka deposit into a consolidated mine schedule and the likely modifications required to the processing facility and the associated capital costs.

A summary of the financial analysis is included in the table below:

Item	US$1,100/oz
Average Cash Cost (US$/oz)1	766
Production/year (kozs)	28
Average Recoveries (%)	95
Initial Open Pit CAPEX (US$m)2	3
Initial Underground CAPEX(US$m)3	10
Open Pit Mining Cost (US$/t)4	2.54
Underground Mining Cost (US$/t)	48.4
Underground Development Cost (US$/m)	5,000
Processing Cost (US$/t ore)4	15.8
Transport to Processing Plant (US$/t ore)	1.0
G&A Cost (US$/year)	0.9

Notes:

1)       Including royalties, excluding tax

2)       Capital cost of pre-stripping open pit and contractor mobilisation

3)       Capital cost of developing the underground operation to be spent in year four of Gonka mine life from internally generated cashflow

4)       Based on cost estimates included in DFS work. Values are slightly higher than average DFS unit costs, due to the higher proportion of fresh ore in the Gonka deposit

Figure 1: Gonka open pit and underground mine plan

http://www.rns-pdf.londonstockexchange.com/rns/7037N_-2016-2-1.pdf

Gonka Integration with the Project

Since the Yanfolila plant has been designed for potential modular expansion from 1.25Mtpa to 1.5Mtpa, the Company has undertaken a conceptual financial analysis to investigate the likely incremental value uplift from incorporating Gonka into a consolidated Yanfolila mine schedule by increasing throughput at the Yanfolila processing plant and where the first year of mining from Gonka is aligned to that of the rest of the Project. This financial analysis incorporated DRA's mining schedule and operating costs (as outlined in the table above) into the existing DFS financial model, along with additional capital estimate of US$5m to expand the plant capacity to 1.5Mtpa.

The results from this analysis were highly encouraging, revealing that by incorporating Gonka, a significant incremental uplift in the project NPV_8% by US$24 m can be achieved relative to the DFS, with a total project NPV_8% of US$166m using a gold price of US$1,250/oz. Using a more conservative gold price of US$1,100/oz, the value uplift is still significant at US$13m with a total project NPV_8% of US$101m. Financial improvements are further summarised in the table below.

	DFS January  2016 (US$1,250)	DFS January 2016 (US$1,100)	DFS + Gonka January 2016 (US$1,250)	DFS + Gonka January 2016 (US$1,100)
NPV (US$m, 8% discount rate)	142	88	166	101
IRR (%)	55	37	56	37
LoM Ore Mined (Mt)1	8.8	8.8	11.1	11.1
Strip Ratio (waste:ore)2	12.1:1	12.1:1	11.6:1	11.6:1
LoM Grade (g/t)	2.77	2.77	2.79	2.79
LoM Contained Gold (koz)	787	787	956	956
Recovery (%)	92.5	92.5	92.9	92.9
LoM Recovered Gold (koz)	727	727	888	888
Production Year 1 (koz)	121	121	138	138
LoM Production/year (koz)	102	102	124	124
LoM Cash Costs (US$/oz)	645	645	657	657
LoM AISC (US$/oz)3	720	713	741	733
Project CAPEX (US$m)4	79	79	87	87

Notes:

1.        The DFS life-of-mine ("LoM") plan comprises the Komana East ("KE") and Komana West ("KW") deposits for which Ore Reserves have been reported (as announced on 15 December 2015), as well as ore from the Guirin West ("GW"), Sanioumale East ("SE") and Sanioumale West ("SW") deposits based on pit designs and mining schedules applied to the Indicated Mineral Resources for these deposits. Gonka deposit is not currently included in DFS, with mining inventory based conceptual mine designs around a combination of SAMREC Inferred Mineral Resources and Goldfields internal estimates (as outlined above in this announcement)

2.        Excluding any ore from Gonka underground mine

3.        Difference in all-in sustaining costs (AISC) between difference gold price scenarios, reflect the changes in royalties payable.

4.        Of the total Project CAPEX, US$2m has already been spent on plant earthworks

As the Gonka mine schedule and integration is only at a desktop study level, no optimisation has been undertaken on the timing and blend of ore types to the plant.  Along with further studies on Gonka, the Company will look to optimise the mine schedule to maximise plant throughput at 1.5Mtpa.

Overview of the Gonka Deposit

Mining of the Gonka deposit is not currently included in the Company's DFS on the Yanfolila Project. As per the announcement of the Company's DFS on 18 January 2016, Hummingbird is considering developing the high grade Gonka deposit. The Gonka Study has been compiled by DRA for Hummingbird and has allowed the Company to assess the ability to exploit the Gonka deposit as part of larger consolidated Yanfolila Project.

The Gonka deposit is a geological extension along strike southwards of the Komana East deposit. The Gonka deposit is 4.5 km south of the Komana East deposit and within the same sequence of massive basalt, polymictic conglomerate and lithic greywacke. The deposit is open at depth and has considerable opportunity to increase the scale of the mine when this is fully evaluated from further drilling and other studies.

Figure 2: Gonka Deposit Location

http://www.rns-pdf.londonstockexchange.com/rns/7037N_1-2016-2-1.pdf

DRA's mine schedule and associated mining inventory was formed on the basis of conceptual mine designs for both the open pit and underground mines:

·    A Whittle optimisation was used to create a pit shell for the open pit mine

·    Similarly, Datamine's Mineable Shape Optimiser was used to identify the parts of the resource (outside the open pit shell) amenable to long hole stoping. Following this stopes were designed, providing the basis for the underground schedule

The resulting schedule generated by DRA mines averages of 300ktpa @ 2.98g/t for 28kozpa over a combined 6 year mine life. It is anticipated that Gonka would initially be mined as an open pit and will be mined using conventional drill and blast methods over 4.15 years with an average strip ratio of 8.4:1 (w:o). Mining operations will then transition to an underground mine in year 4 and extend the mine life to a total of 6 years. The underground mine is planned to utilise long hole stoping ("LHS"), commencing from the bottom of the open pit (see Figure 1).

The Company subsequently incorporated DRA's Gonka Study outputs into the DFS mine schedule and financial model, in order to analyse the incremental value uplift in the value of project. Key assumptions used in this analysis were:

·    The Yanfolila plant has been designed to allow a modular expansion from 1.24Mtpa to 1.5Mtpa, at an additional capital cost of US$5m, with main adjustments related to additional leaching tanks and enhancements to the comminution circuit

·    All operating costs were taken from DRA's Study, which leveraged off the detailed cost estimation work completed for the DFS to estimate open pit mining and processing operating costs.

·    For underground mining and developments, DRA estimates were used.

While this conceptual analysis has demonstrated that the Gonka deposit has the potential to add significant value to the Yanfolila project, it is important to note that nature of the work completed in this analysis is at a desktop study level and further drilling and studies will be required to optimise the mine plan and schedule.

DRA Consent

DRA Projects has reviewed the information contained in this announcement and confirmed it is in accordance with the facts as they are aware and as provided to DRA by Hummingbird's specialist consultants.

**ENDS**

Enquiries:

Daniel Betts Thomas Hill Robert Monro	Hummingbird Resources plc	Tel: [phone]
Samantha Harrison	RFC Ambrian Ltd Nominated Adviser and Joint Broker	Tel: [phone]
Jon Belliss	Beaufort Securities Limited Joint Broker	Tel: [phone]
Lottie Brocklehurst Susie Geliher Hugo de Salis	St Brides Partners Ltd Financial PR/IR	Tel: [phone]

About Hummingbird Resources Plc

Notes to Editors

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 Gold Project in Mali and the Dugbe Gold Project in Liberia.  Its current focus is on bringing Yanfolila, which has a Probable Reserve of 665,600ozs @ 3.03g/t and total Resources of 1.8Moz of gold and an additional 390,700ozs of non-compliant exploration potential.  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. 

The 4.2Moz Dugbe Gold Project in Liberia provides Hummingbird with excellent development upside.  An optimisation of the DFS is on-going whilst Yanfolila is brought to production in the near-term.  Additionally, the Company has 4,000km² highly prospective exploration ground in Mali and Liberia and is constantly evaluating new quality assets.

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

 

END

 

 

MSCEAKAFESXKEFF